Trades, GSEs Concur HUD Affordable Housing Proposal, in Current Form, Not Conducive to Meeting Goals
WASHINGTON - While concurring with the U.S. Department of Housing and Urban Development's (HUD) objective to increase home ownership among low-income families and minorities, CUNA and NAFCU, as well as the housing Government-Sponsored Enterprises Fannie Mae and Freddie Mac have each sent the agency their comment letters on HUD's proposed...
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WASHINGTON – While concurring with the U.S. Department of Housing and Urban Development’s (HUD) objective to increase home ownership among low-income families and minorities, CUNA and NAFCU, as well as the housing Government-Sponsored Enterprises Fannie Mae and Freddie Mac have each sent the agency their comment letters on HUD’s proposed affordable housing rules, explaining their reservations with various aspects of the proposed rule. The proposed rule public comment period was scheduled to end July 2, but it was extended two weeks to July 16 because of the July 4th holiday weekend and because HUD received several requests for additional time. By statute, HUD sets the annual affordable housing goals that require a percentage of Fannie Mae and Freddie Mac’s lending go to underserved borrowers and communities. CUNA’s comments focused on two areas – the formula HUD is proposing using to determine the housing goals and the provision concerning data integrity. The goals, CUNA wrote, are expressed as a fraction of affordable housing loans, instead of total loans purchased by the GSEs. “The concern is that the numerator, or number of affordable housing loans that GSEs purchase, cannot be increased enough to achieve the housing goals,” CUNA’s comment letter read. In addition, CUNA wrote, “the goal equation is not limited to purchase loans and includes refinances, which are likely to decrease in number as mortgage interest rates rise. Excluding refinances would help the GSEs focus on the purchase money market, consistent with public policy objectives, including increased minority home ownership.” Concerning data integrity, CUNA expressed its concern that the certification process HUD is proposing “allows no latitude for inaccurate data” and “would place a severe burden on both the GSEs and the providers of such data.” As an alternative, CUNA recommends HUD consider having the GSEs certify the integrity of their data collection and submission process. CUNA emphasized that while HUD’s objectives “can best be reached by setting goals that are based on accurate analyses of the market and are achievable as well as verifiable.the goals should not impose such an inordinate burden on the GSEs that they may be compelled to reduce the number of loans that they purchase. Such a consequence would be extremely unfortunate for the underserved, and other potential homeowners, as it would restrict credit unions’ access to the secondary market and their ability to provide mortgage loans.” In its comment letter, NAFCU expressed its concerns that HUD’s estimate of market size used to set the housing goal levels “may be overstated and that, as a result, have caused the goal and subgoal levels to be extremely optimistic and very likely quite difficult for the GSEs to achieve.” Specifically, HUD took into account six statutory factors to arrive at the proposed housing goals levels: demographic, economic and housing conditions; national housing needs; GSEs’ past performance and effort toward achieving the housing goals; size of the mortgage market that qualifies for the housing goals; ability of the GSEs to lead the industry; and the need to maintain the sound financial condition of the GSEs. To meet the proposed housing goals, NAFCU opined that the GSEs will have to “aggressively expand activities in certain markets, which could lead to market distortions.” This impact on the secondary market, in turn, “could have a significant unintended effect on the ability of credit unions to provide mortgages to many of their members.” In addition, NAFCU wrote, it is concerned about the impact this will have on the availability of affordable loans to working families that earn low to moderate incomes, but fall just outside of HUD’s housing goals parameters. NAFCU recommends HUD consider lowering its proposed goal levels so they’re more representative of “reasonable market estimates.” NAFCU also suggests HUD consider removing single-family refinance loans from the calculation of the goals because this “will help to further the goal of increasing home ownership of low- and moderate-income individuals while also eliminating the volatility of single family refinance loan volumes from the market estimates.” Like CUNA, NAFCU is also concerned that the reporting certification requirement in HUD’s proposed rule that would add measures to ensure the integrity of reports and data submissions would prove to be “overly burdensome” for credit unions providing information to the GSEs about the loans. As an alternative, NAFCU proposes HUD factor into the criteria “some level of tolerance for inadvertent mistakes, clerical errors or other inaccuracies due to the high volume of data being submitted to the agency.” Fannie Mae also encouraged HUD to “consider and avoid any potential unanticipated outcomes of goals proposed that could undermine our shared objective of expanding affordable housing to all Americans who need it.” It echoed NAFCU’s concern that “goals that do not reflect the market business mix could require over-investing in market segments that are more likely to generate goals-qualifying mortgages.” Fannie Mae requested HUD to reconsider several of its assumptions. “As presented, the assumptions do not reflect actual market experience – or likely future conditions – and therefore, have led the proposed rule to overstate the likely share of goals-qualifying mortgages originated and available to Fannie Mae.” Freddie Mac also stated in its comment letter that the goal levels proposed by HUD are “so far beyond what the primary market is likely to produce that the goals may be unfeasible unless the GSEs restrict some non-goal qualifying purchases.” Like NAFCU, it recommends HUD remove single-family refinances from the goal calculation, as well the home purchase subgoals. Freddie Mac also asserted that HUD’s analysis of the impacts of the proposed rule “overestimated the benefits and failed to fully consider all of the costs associated with the Proposed Rule.” -
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